Bold Banking Predictions for 2015
January 2, 2015 9:00 AM
Fearless forecasts from BankThink's stable of industry veterans, experts and critics.
The Bank as Personal Shopper
"2015 will see banks move beyond their traditional role as product providers to play a deeper role in the everyday lives of their customers. With digital technologies, banks will help customers reach decisions about what to buy, and where and when to buy it-whether it's a home, car or even a restaurant meal. Banks will also offer new services such as personal financial management tools. Some financial institutions are already heading down this 'everyday bank' path."
Dave Edmondson, senior managing director and head of Accenture's banking practice in North America
(Image: iStock)
Financial Innovation Meets Financial Inclusion
"The creative work of visionary entrepreneurs will begin to percolate and demonstrate the potential for innovative financial products, services and infrastructure to reach scale. We'll see more affordable ways for a wide range of consumers to access small loans. We'll see broader deployment of technology that removes friction from the systems that enable the movement of money. And we'll approach a more shared understanding what it means to be financially healthy ."
Lisa Servon, professor at the New School's Milano School of International Affairs, Management and Urban Policy
(Image: iStock)
Just What the Banker Ordered
"The financial services industry will take a cue from the health care system and begin to focus on customer outcomes. Financial providers will begin to analyze how debt, savings, access to planning tools and subjective measures of well-being fit together, and how financial innovation can ultimately bolster both consumer financial health and industry reputation.
"We will see more high-function, high-style transactional accounts that walk like a prepaid card but have the skeleton of a [demand deposit account]-both because more brick-and-mortar banks will create prepaid-like DDA products, and because the CFPB's new rules will cause some prepaid providers to shift to more DDA-like structures."
Jennifer Tescher, president and chief executive of the Center for Financial Services Innovation
(Image: iStock)
More Stalled Attempts at GSE Reform
"The prospect for reform of Fannie Mae and Freddie Mac will be like it has been each of the last six years since the conservatorships began: full of potential, but like an open bottle of champagne after a New Year's celebration, [it] will eventually lose its fizz due to political intransigence and ideology."
Cliff Rossi, professor at the Robert H. Smith School of Business at the University of Maryland
(Image: iStock)
Big Breaches, Big Disruptions
"2014 saw major [security] incidents impacting various banks. 2015 will see this trend continue, with the prospect of a massive incursion incident visited on one or several of the global banking entities. Banks will need to rethink how they counter this threat by deploying tools that can be deployed on and against data from social media and other mobile apps to protect their network at all its weakest points."Traditional banking models will come under even greater threat in 2015. Two examples that come to mind are in customer lending, with Lending Club's gaining greater momentum and traditional credit card payment and fulfillment processes under threat from mobile phone apps. Banks will need to identify ways to partner with new mobile technology and apps that will enable them to stay at the top of this new wave of innovation in the industry as well as maintain their core customer relationships."
Andrew Waxman, consultant in IBM Global Business Services' financial markets risk and compliance practice
(Image: Thinkstock)
A Kick in the Pants
"Shareholder activism will accelerate as many banks are unable or unwilling to adapt to a changed industry environment. The changes are structural, not cyclical. Survival alone is no longer sufficient. Banks must find ways to close performance gaps between their returns on equity and their costs of equity before someone else does it for them."
J.V. Rizzi, banking industry consultant and investor
(Image: iStock)
Stricter Capital Standards and a Weakened Volcker Rule
"[Global systemically important banks] should be on the lookout for stricter standards for how they calculate capital under the advanced internal ratings-based approach. The Basel Committee for Bank Supervision is likely to reduce the flexibility that large banks have in calculating risk weighted-assets. This will impose additional data and compliance burdens on banks. The Basel committee will also continue to demand transparency from banks into their inputs and models for how they calculate RWAs. In the U.S., I expect that the Volcker Rule compliance date will be extended for large banks and certainly for smaller banks. Expect a full year of large banks trying to weaken the Volcker Rule. Given how poorly they are doing at implementing it, this should be no surprise."
Mayra Rodriguez Valladares, principal at MRV Associates
(Image: Former Federal Reserve chair Paul Volcker, via Bloomberg)
Mortgage Lenders Get Smarter
"Over the last several years, regulators have taken a very active role in the mortgage industry, forcing lenders to commit resources to be compliant with changing regulations and to be more focused on risk management. This resulted in conservative underwriting standards, and difficulty for some borrower segments to get financing. Yet at the same time, free government money made low rates the norm, and high revenue per loan possible for many lenders. In 2015, the pendulum will swing back, as easy refi business wanes. Lenders hungry for volume will begin to change their criteria to attract more business. This will help banks that are thoughtful and analytic about mortgage underwriting to attract new customers and write more 'make sense' mortgage loans."
Garth Graham, partner with Stratmor Group
(Image: iStock)
Risk Swells in Real Estate
"Real estate prices, both residential and commercial, will continue to increase, while the Fed continues artificially low interest rates, and banks will succumb to the eternal real estate temptation once again. Credit standards for real estate will be loosened, along with more political pressure from the lame-duck Obama administration for more risky residential mortgage lending. The real estate risk concentration of the banking system, already very high, will rise further."
Alex Pollock, resident fellow at American Enterprise Institute
(Image: iStock)
Big Banks Lose Face
"Don't mistake growth in market share by the nation's largest banks for astute management. On top of the record-breaking $120 billion they've paid in penalties since 2008, look for new assessments in 2015. They'll also show a complete lack of self-awareness by committing another PR blunder similar to charging for debit transactions or inviting millennials to send nasty messages to their executives. Maybe they'll reveal how their lobbyists actually write the laws that weaken Dodd-Frank. Oops, they've already done that . Draw up a chair and wait for new fireworks in 2015."
Kevin Tynan, senior vice president of marketing at Liberty Bank for Savings in Chicago
(Image: iStock)
A Return to Common Sense
"This year the Dodd-Frank Act turns five years old. The unruly toddler has given American consumers fewer and more expensive loan options, a generation of Americans who would rather rent vs. own and compliance departments which in many companies are now larger than the loan department.
2015 will be the year common sense and balance begins to return to the regulatory environment. Last year, a meeting was held with industry leaders at the White House, which is now concerned with credit access. Clear evidence that the pendulum has swung too far. While consumers need protections, lenders need common sense rules, clear guidance and flexibility to protect their loans."
Richard Booth, industry consultant and mortgage banker
(Image: iStock)
